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Earnings Watch: Nike Battles Competition

By Estimize Stock MarketsMar 20, 2017 05:34PM ET
Earnings Watch: Nike Battles Competition
By Estimize   |  Mar 20, 2017 05:34PM ET
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Nike Inc. (NYSE:NKE) | Consumer Discretionary, Textiles, Apparel & Luxury Goods | Reports March 21, After Market Closes

Key Takeaways

  • The Estimize consensus is looking for earnings of 55 cents per share on $8.47 billion in revenue, 3 cents higher than Wall Street on the bottom line and right in line on the top.
  • Management’s decision to discontinue reporting future orders puts additional pressure on margins to excel.
  • Increased competition from Under Armour (NYSE:UAA) and Adidas (DE:ADSGN) as well as a rapidly changing retail environment puts pressure on Nike to innovate and expand globally.

Nike headlines a slow week of earnings with its highly anticipated fiscal third-quarter report Tuesday afternoon. Dismal reports from Under Armour and other footwear retailers this earnings season portends pressure to the downside for Nike’s announcement. As a result, analysts at Estimize cut earnings estimates 11 percent and revenue 2 percent from previous forecasts at the end of the fiscal second quarter. Despite some obvious near-term headwinds, the stock jumped 15.2 percent higher in the past 3 months and historically performs well immediately through an earnings report

The Estimize consensus data earnings of 55 cents per share, reflecting a 3% increase from a year earlier. Revenue for the period is forecasted to increase 5% to $8.47 billion, marking steady mid single digit revenue growth for 8 consecutive quarters.

Nike Earnings
Nike Earnings

The fiscal second quarter restored investors' faith that Nike can stave off increasing competition, namely from Adidas, while still maintaining margins and future orders growth. In the three-month period ending in November, gross profit came in at $3.62 billion with 44.2 percent margins. Future orders, on the other hand, slipped 4 percent in North America but still posted overall growth of 2 percent on a constant currency basis. Management also reveal that it would discount reporting future order figures, making margins all the more important moving forward.

With Adidas, Under Armour and Lululemon (NASDAQ:LULU) all making strides in the retail industry, Nike faces an uphill battle to remain king of the hill. Nike’s clear market-share lead, superb brand reputation and ongoing prowess for innovation and design will help it maintain a significant gap between the competition. However growth opportunities in domestic markets are running out as Nike controls over 50% of the market in all major sporting segment. The best case for Nike is to expand global shares in Europe and Asia where its presence holds a less-pronounced presence.

Do you think NKE can beat estimates?

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Earnings Watch: Nike Battles Competition

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Earnings Watch: Nike Battles Competition

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